Lesson

Earnings & Catalysts Tracker | Options Educator

Decode earnings reports, guidance signals, and catalyst calendars for smarter trades.

In this lesson

The Earnings Report Breakdown

  • EPS is net income divided by shares: $62.5 million ÷ 50 million = $1.25, a beat of $0.05, or 4.2%, against a $1.20 estimate
  • A beat can hide a miss: $0.08 of the $1.25 is a one-time tax benefit, so underlying EPS is $1.17, which is $0.03 below the estimate
  • Revenue of $510 million beat the $500 million estimate by 2.0% and is 13.3% above the $450 million of a year ago

Guidance, the Whisper Number and the Earnings Call

  • Guidance of $1.10 to $1.20 against a $1.30 consensus has a midpoint of $1.15, which is $0.15, or 11.5%, below what the market expected
  • A reported $1.25 beats the $1.20 consensus by $0.05 (4.2%) but misses a $1.28 whisper number by $0.03 (2.3%)
  • On the call the question and answer session reveals more than prepared remarks: a gross margin of $204 million ÷ $510 million = 40.0%, down from 42.0%, is a question to ask

Options Around Earnings: The Expected Move and IV Crush

  • The $100 straddle expiring in 7 days costs $3.31 + $3.31 = $6.62 at 60% implied volatility, so the market is pricing a move of about 6.6%
  • Implied volatility falls once the report is out: with the stock unchanged the straddle drops from $6.62 to $3.06, and at 60% it would still be worth $6.14, so the crush alone costs $3.08
  • Direction is not enough: after a 5% move to $105 the straddle still loses $1.24, and it takes a move of about 6.5% just to break even

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